Wall Street ended sharply lower Wednesday after the Federal Reserve held interest rates steady, with AI-related chip stocks adding to recent declines ahead of \u200bquarterly reports from Microsoft and Meta Platforms and the Nasdaq 100 index marking an 11% drop from its June record high.<\/p>\n
The Fed\u2019s widely expected \u200cdecision<\/a> to leave the benchmark interest rate in the 3.50%-3.75% range drew dissents from three of the 12 members of the policy-setting Federal Open Market Committee who \u201cpreferred\u201d a quarter-percentage-point hike at this meeting.<\/p>\n The benchmark S&P 500 hit its lowest level in a month, while the tech-heavy Nasdaq composite index was down about 9% from its June record high.<\/p>\n The Nasdaq 100 index dropped 2.1%, extending recent \u200blosses as investors unloaded AI-related stocks due to ongoing concerns about heavy capital spending. That index is composed of the Nasdaq exchange\u2019s most valuable \u200bnonfinancial companies.<\/p>\n Investors had mostly expected the Fed to keep rates unchanged. Inflation has been running above the central bank\u2019s target for \u2060more than five years, and up until last month it was accelerating as the war in the Middle East pushed up global fuel and food prices.<\/p>\n \u201cThe \u200bFed held pat, as expected. The bigger question now though becomes, how much pressure will they have to hike in September? Inflation is running hot and with surging \u200bcrude oil, the market expects the next hike to indeed be in September,\u201d said Ryan Detrick, chief market strategist at Carson Group.<\/p>\n Investors worry that major U.S. companies are deepening a web<\/a> of AI-linked investments and continuing to funnel billions into the emerging technology at the expense of free cash flow.<\/p>\n Meta Platforms dropped 4% in extended trade after the social media company said<\/a> it now expects \u200b2026 capital expenditure to be between $130 billion and $145 billion, compared with its prior forecast of $125 billion to $145 billion.<\/p>\n Also after the bell, Microsoft climbed 0.6% after it \u200btopped<\/a> Wall Street estimates for quarterly cloud revenue growth, a sign its massive spending on AI infrastructure was paying off.<\/p>\n Meanwhile, competition from China has been heating up, both in the \u200crace to \u2060develop advanced chips and as Chinese firms roll out cheaper AI models.<\/p>\n Speaking to reporters, Fed chief Kevin Warsh said spending on AI was laying the groundwork for future growth.<\/p>\n AI-related chipmakers added to recent losses after a sixfold jump in SK Hynix\u2019s quarterly profit fell short of lofty investor expectations<\/a>. The South Korean company\u2019s shares fell 10%.<\/p>\n AI infrastructure company Vertiv slumped 17% after missing quarterly revenue expectations.<\/p>\n The S&P 500 declined 1.52% to end the session at 7,316.15 points. The Nasdaq declined 1.74% to 24,442.94 points, while the Dow \u200bJones Industrial Average declined 2.19% to 51,594.14 \u200bpoints.<\/p>\n Eight of the 11 S&P \u2060500 sector indexes declined, led lower by industrials down 3.24%, followed by a 2.5% loss in information technology.<\/p>\n Analysts on average expect S&P 500 aggregate second-quarter earnings to jump 40% from a year ago, with AI-related stocks accounting for much of that \u200bgrowth, according to LSEG I\/B\/E\/S.<\/p>\n Strong earnings forecasts and Wall Street\u2019s recent decline have left the S&P 500 trading at \u200babout 20 times expected \u2060earnings, just above its 10-year average of 19, according to LSEG data.<\/p>\n Ford Motor gained 2.1% after raising its annual profit outlook<\/a> for a second time this year. Lennox tumbled 21% after the HVAC solutions maker lowered its annual profit forecast.<\/p>\n